Sealing the Deal

By Kayla Sargent

Over the past two weeks, the Japanese and European Parliaments each signed their end of respective trade deals which will improve access for American ag producers to each country’s market.  While the European Union agreement specifically increases U.S. beef exports, the Japanese trade deal will lower or eliminate tariffs on nearly 90 percent of U.S. food and agricultural products destined for Japan.

Trump is expected to sign the Japanese agreement this week and both deals are on track for early 2020 implementation.  The year-end news was welcomed by U.S. trade organizations.

“Now that the final hurdle to a deal with Japan has been cleared, American farmers and ranchers can count on increased market access for their products – from beef and poultry to fruits, vegetables and nuts,” American Farm Bureau President Zippy Duvall said.  “This is a big win for farmers and we hope it’s the first of many trade deals to be approved that will open markets and level playing fields for American agricultural exports.”

Since the withdrawal from the Trans-Pacific Partnership (TPP) in early 2017, American ag producers have been at a disadvantage in the Japanese market, facing steeper tariffs than those countries participating in the CP-TPP.  Upon implementation of the new deal, tariffs on American beef will be level with competing countries like Canada, Mexico, Australia and New Zealand.

Despite a steep tariff rate, Japan is still the largest value destination for U.S. beef and pork exports.  As the tariffs decrease under the new deal, United States Meat Export Federation (USMEF) expects beef and pork exports to grow from last year’s $3.7 billion to $4 billion in 2020.  With the drastic drop in beef tariffs from today’s 38.5 percent to 9 percent by 2035, UMEF predicts the beef export market to Japan to reach $2.8 billion.  Post-BSE record high beef exports to Japan were achieved in 2017 at $1.89 billion.

“This agreement is one of the biggest developments in the history of red meat trade, as no international market delivers greater benefits to U.S. farmers and ranchers, and to the entire U.S. supply chain, than Japan,” USMEF President and CEO Dan Halmstrom said.

USMEF said the deal will also increase access to the Japanese market for value-added and processed red meat as tariffs phase to zero on those products.

U.S. beef will also enjoy greater access to the European market starting in 2020.  The annual duty-free exports of U.S. beef is expected to grow from $150 million to $420 million under the new agreement.

“Lack of capacity in the duty-free quota has been a source of frustration on both sides of the Atlantic and a U.S.-specific share of the quota will help ensure that U.S. beef can enter the European market 52 weeks per year, without delay or interruption,” Halmstrom said.

Beyond the beef industry, the Japanese deal contained good news for other agricultural sectors.  Tariffs will be immediately eliminated on U.S. farm products including almonds, blueberries, cranberries, walnuts, sweet corn, grain sorghum, food supplements, broccoli and prunes for a total value of $1.3 billion.

Tariffs will be incrementally eliminated on another $3 billion worth of U.S. agricultural products including wine, cheese, whey, ethanol, frozen poultry, processed pork, fresh cherries, beef offal, frozen potatoes, oranges, egg products and tomato paste.

Country Specific Quotas which provide access for a specific amount of imports at a preferential tariff rate, usually zero, were created for wheat, wheat products, malt, glucose, fructose, corn starch, potato starch and inulin.

“Japan has always recognized that Montana wheat is the best in the world and that beef with Montana origins is of the highest quality,” Montana Farm Bureau President Hans McPherson said.  “We recognize that the more agricultural exports increase, the demand for those exports means higher prices for our agricultural producers.”

McPherson said with the Christmas recess on the horizon, now is the time to take this momentum and open more international markets.  Specifically, he urged passage of the United States Mexico Canada Agreement (USMCA) before year end.

AFBF’s Duvall echoed that statement, urging Congress to bring the USMCA “across the finish line.”


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